There's Still Time for a Sensible Approach to NJ's Health Insurance Exchange

by Gordon MacInnes
Published in NJPP Blog: As a Matter of Fact ...


Last week, Gov. Christie vetoed the second bill to have New Jersey set up its own health insurance exchange to implement Obamacare. The legislative majority believes that we would be better served operating our own insurance exchange, rather than await the uncertain shape of a massive federal exchange or a poorly-defined “partner” exchange with most of the heavy lifting done by the feds.

The governor’s veto message – and its emphasis on uncertainty – gets the whole thing backwards. Fortunately, there is still time for the governor to send a letter to Washington opting for the state exchange, issue an executive order to get the machinery rolling, and work with the Democratic leadership to draft a third, acceptable bill.

Let’s start with the Obamacare landscape. Two years ago the president signs the biggest and most complicated health care legislation since the creation of Medicaid and Medicare in 1965. Twenty-seven states file petitions declaring the Affordable Care Act unconstitutional. The Republican Party spends two years promising to repeal the ACA. With unemployment dancing at 8 percent, the president’s re-election chances don’t look great and the conservative majority on the U.S. Supreme Court is expected to agree that the ACA doesn’t pass muster.

Lo and behold, the Court surprises the nation with its June decision, which is followed by a respectable re-election win by the president in November. The trouble is that the deadlines for implementing Obamacare were not revised amidst all this uncertainty: On January 1, 2014 the transformative law takes effect and about 30 million folk who are without health insurance today will suddenly become paying customers.

Second, since when has certainty ruled political life in America? The governor understands risk perfectly well. He took a political risk when he showed such warmth for the president’s tour of the devastated Jersey Shore. He took a fiscal risk when he projected the most aggressive revenues and the highest spending increases of any governor in the nation for his 2013 budget. He passed the risk along to every municipality when he proposed that the state grab the increased utility tax revenues instead of allotting them to towns as mandated by law.

Now back to Obamacare. During the period of constitutional and political tumult, New Jersey received $8.7 million from the feds to do the background work on the informational, financial, promotional and logistical issues around the health insurance exchange. So if anyone should have a relatively clear idea of the costs and implications of establishing a New Jersey insurance exchange, it is the Christie administration, which has used federal funds to explore these complicated questions.

Here’s an important problem to untangle in all of this. There are two ways that currently uninsured persons will be covered under Obamacare: the insurance exchange for households with incomes between 138 and 400 percent of the federal poverty level (at 200 percent a family of three takes in $38,180); or Medicaid, where states can opt to accept a major expansion in Medicaid coverage for adults and children in families up to 138 percent of the poverty level. Gov. Christie has not signaled whether he will accept the expansion, but either way it would be very sensible for the exchange to use technology to allow anyone up to 400 percent of poverty to enter their data and be guided to the most efficient option for health coverage. A New Jersey-operated exchange would have to worry about only one state to coordinate between the premium subsidy and Medicaid eligibility questions.

Right now, it looks the federal government may have to establish an exchange for up to 27 states, each with its own criteria for Medicaid eligibility (some states exclude legal immigrants altogether while some allow only those who can prove residence for at least five years) and their own scope of coverage with very different reimbursement rates. The notion that the federal government and up to 27 states will have the technology worked out within the next ten months to accept applicants by October 2013 is a very, very optimistic notion. Why take the chance if your state has spent two years studying the problem and can avoid sinking into such a potential bureaucratic morass?

Second, with a New Jersey exchange, the state could negotiate with insurance providers to get the best package of coverage at the best cost. Otherwise, consumers will be greeted with a bunch of packages that have been constructed to maximize the profits of the offering company (if not, the CEO should be fired). The state understands that negotiating can lead to insurance coverage that reduces premium costs without shrinking coverage. In fact, that is exactly what the state does in providing health insurance to its employees.

December 14 is the cutoff for opting for the state-operated exchange. The governor has better information about the costs of a state exchange than anyone in Washington. He has better information about what a state exchange can do that a federal exchange cannot. Unless that confidential information suggests that the state is not capable of operating its own exchange, he should send a letter to Secretary Sebelius by Friday saying “we’re in – details to follow.”